Medical Care in a Real-World Marketplace
by Lane Filler
February 04, 2014
Source: Long Island Newsday
When Super Bowl ads featuring hybrid dogs and half-naked celebrities hype the affordability of $49 X-rays and the convenience of 24/7 angioplasty clinics, we'll know we're on the way to conquering spiraling health care costs.
We live in a free-market nation. Competition forces companies to extol their advantages with frequency and volume. Five-dollar Footlong, anyone? Two-for-one pizza? Or a car that's way better (cheaper, more reliable, better mileage) than that seemingly similar other make of car?
But when was the last time you saw doctors advertise their prices as unbeatable, their hours as ultraconvenient, or their heart catheterizations as likely to attract hotties?
Within individual industries, too, products are touted to people who want to spend different amounts. A Kia meets one person's needs while another must have a Mercedes-Benz.
But you never see that guy in a 10-gallon hat on a commercial screaming, "If you need a reliable MRI at the lowest prices around, come on down to Eddie's House of Imaging!" Nor do you see, for high-end folks, beautiful people in ads touting "the ultimate in spa surgery, in the lap of sterile luxury."
It's impossible to watch TV for 15 minutes without seeing car insurance companies proclaim how their prices trump the competitors'. When was the last time you saw a health insurance plan advertised on the basis of price?
You do not see doctors or procedures or health insurance advertised in this way, with a couple of notable exceptions, because the medical market is neither free nor competitive.
Employer-provided health insurance became the norm after World War II when companies looked for cheap ways to please employees. Medicine at that time consisted mostly of dispensing drugs, cutting off body parts, mopping damp brows and saying, "You have written a will, right?" It was cheap. But then we went and invented modern medicine, with all its bother and expense and healing. Thanks to employer-provided insurance and Medicare, Medicaid and even privately purchased health insurance, we hadn't learned to shop for medical needs on the basis of price, quality and convenience.
If most of the charge is paid by someone else, who cares how much it costs? And if those who are paying give us little or no choice about insurance policies or care providers, who cares how good they are?
So health care costs grew 36 percent faster than inflation from 1999-2010, but not in the few slivers of health care where the insurance generally doesn't cover the procedures and the consumer picks and pays. One of those is Lasik corrective eye surgery. Another is cosmetic surgery. Both declined in cost, in inflation-adjusted dollars, by more than 20 percent between 1999 and 2010, according to the National Center for Policy Analysis, a free market-supporting think tank. Those services declined in cost because consumers cared about the price.
We are on a path to curbing cost increases, now. Employers have moved to higher-deductible plans and health savings accounts to cover expenses funded by both employers and employees. This guarantees we will be covered for big costs but makes us much more price conscious about that extra CT scan. High deductibles are also a feature of many plans being offered on the Affordable Care Act exchanges. Finding a way to structure Medicare so that recipients become cost-conscious without busting their budgets would help even more.
The development of American health care as something outside of free-market principles has made it inefficient and uncompetitive. Applying those principles by making consumers conscious of price and quality can address it. And we'll know it's working when we see a Super Bowl ad for cheap vasectomies that promises to make us a real hit with the ladies.